Recon Technology Reports Fiscal 2018 Second Quarter and First Six Months Financial Results

BEIJING, Feb. 9, 2018

BEIJING, Feb. 9, 2018 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a China-based independent solutions integrator in the oilfield service and environmental protection, electric power and coal chemical industries, today reported its financial results for the second quarter and first half of fiscal year 2018, which ended December 31, 2017.

Second Quarter FY2018 Financial Highlights (all comparable to the prior year period):

• Total revenues for the second quarter of FY2018 increased by 35.5% to RMB41.1 million ($6.3 million)
• Gross profit for the second quarter of FY2018 was RMB4.0 million ($0.6 million)
• Gross profit margin for the second quarter of FY2018 was 9.6%, which decreased by 28.4% compared to the second quarter of FY2017, largely due to a higher proportion of equipment sold at a lower price during the test-run period.
• Net loss attributable to Recon for the second quarter of FY2018 was RMB10.2 million ($1.6 million), or RMB1.22 ($0.19) per basic and diluted share, compared to net loss attributable to Recon of RMB4.4 million, or RMB0.70 per basic and diluted share, for the same period of last fiscal year.
• Non-GAAP net loss attributable to common shareholders excluding certain non-cash expenses was RMB3.1 million ($481,456), or RMB0.37 ($0.06) per basic and diluted share, for the second quarter of FY2018, compared to non-GAAP net income attributable to common shareholders of RMB3.3 million, RMB0.53 per basic share, or RMB0.48 per diluted share, for the same period of last fiscal year.

First Half of FY2018 Financial Highlights (all comparable to the prior year period):

• Total revenues for the first six months of FY2018 increased by 39.7% to RMB53.2 million ($8.2 million)
• Gross profit for the first six months of FY2018 was RMB6.0 million ($0.9 million). Gross profit margin for the first six months of FY2018 was 11.4%, which decreased by 21.7% compared to the first six months of FY2017.
• Net loss attributable to Recon for the first six months of FY2018 was RMB17.0 million ($2.6 million), or RMB2.21 ($0.34) per basic and diluted share, compared to RMB9.8 million, or RMB1.62 per basic and diluted share, for the same period of last fiscal year.
• Non-GAAP net loss attributable to common shareholders excluding certain non-cash expenses was RMB5.4 million ($0.8 million), or RMB0.70 ($0.11) per basic and diluted share, for the first six months of FY2018, compared to non-GAAP net loss attributable to common shareholders of RMB234,103, or RMB0.04 per basic and diluted share, for the same period of last fiscal year.

Management Commentary

Mr. Shenping Yin, Founder and CEO of Recon stated, "We're pleased to see continued growth of our business and revenue generated accordingly in this quarter. As oil prices rebounded and the oil industry recovered from setbacks, our management made prudent decision to invest in manufacturing equipment and constructing wastewater, and oil sludge treatment plants. Our gross margin decreased significantly primarily due to increased sales of equipment with lower margin during the construction and test-run stage of our new plants. After this stage terminates in approximately 6 months to one year, we expect that our gross margin will increase when we plan to produce and sell our equipment with higher margin. Therefore, we believe our operation and profitability will be gradually improved in the coming months. We're excited that many potential clients have shown strong interest in the furnaces we produce, and Qing Hai oilfield and Gan Su oilfield also express their urgent requirement of our wastewater and oily sewage capability. We also maintain constant fast expansion of business scope. Beyond the oilfield service industry, we expand our business to other domains, such as coal chemical and petroleum chemistry. We also invested in Future Gas Station (Beijing) Technology, Ltd. ("FGS"), a service company focusing on providing new technical application and data operation to gas stations of oil companies. With its DT Refuel mobile application, FGS provides solutions to gas stations to improve their operations and their customers' experience. Recon and FGS plan to jointly develop an integrated block chain-based mobile shopping system for use in gas stations. We believe all activities made during our second quarter of 2018 will bring long-term return benefit for Recon and all of its shareholders."

Mr. Yin continued, "Looking to the coming year and beyond, management will focus on the following aspects: 1) for market and business, we will continue improving operation quality and disperse risks by pursuing high-quality business and sophisticated products; 2) for technology and products, we will also enhance cooperation with regional leading manufacturing companies, positively introduces advanced overseas technique and continuously integrate and upgrade current industrial equipment and solutions to establish leading position in various fields, and to maximize the added value of products and service; and 3) for internal control: we will always seek to improve our cash flow management to meet development requirements and minimize company risks."